Recession Proof Home

Have you ever been driving down the street, minding your own business, when a billboard catches your attention and you tell yourself "I need to check this out"?  It happened to me recently on Route 34 in Aurora as I passed the sign shown here.  I had to call Jamie Bigelow at Bigelow Homes to see what was going on.  It turns out that the "World's First Recession Proof Home" is an ingenious marketing campaign that is helping Bigelow move units at its Hometown Aurora subdivision.  The program is a series of incentives that help buyers feel at ease.  The incentives include mortgage protection if you lose your job, home price protection, guaranteed heating bills and down payment assistance among other things.  The beauty of the program is in the marketing.  They are targeting renters in the general vicinity with a direct mail campaign in addition to bold signage, as shown here.  The concept has worked so well that it has been featured on Fox News (here is the clip) as well as the New York Times (link to NY Times story).

So far, the results have been impressive.  As source at Bigelow Homes tells us that the week prior to the program beginning, they had a traffic count of 6.  The week following the program's introduction, traffic increased to 76.  Great results for a very creative program.

More Signs of Life

On Sunday (4/26), the Chicago Tribune ran a front page story about how home sales in the Chicago area are starting to show more signs of life.  The reporter, Mary Ellen Podmolik, went on to say that local realtors are actually feeling pretty good about their prospects lately. Although we are only seeing baby steps, it is indeed a good sign that buyers are beginning to stir.  Perhaps more important is the value that positive news stories can have on the psyche of the home buying public.  We have been inundated with negative news stories about the national and local real estate market for the better part of three years now and if potential buyers begin to see stories such as this, they will surely begin to come off the fence.  Positive real estate information doesn't necessarily need to come from the local media.  I was driving through the downtown area of the western suburb that I live in when I passed a sign in front of a real estate office that caught my attention: "now hiring 2 agents".  This is surely another sign of life in the real estate market.

The Chicago Tribune article can be seen at this link. 

Which Chicago Submarkets Will Be The Last To Recover?

I recently read an article on Builder Online (www.builderonline.com) which asked five "experts" which 5 housing markets would recover first.  The responses were all over the map, but several markets seemed the keep popping up:  San Diego because of its lack of competition and dwindling inventory; Sacramento because of its relative affordability in unaffordable California and Washington, D.C. because it was one of the first markets to have a significant price correction and because the federal government is bound to add thousands of jobs to the local region.

The article got me thinking, what submarkets in the Chicago region are most likely to recover last?  Obviously, the City of Chicago condo market is greatly oversupplied and it could take several years to work through the existing and under construction inventory.  However, it is likely that we will accelerate the absorption of city condo units price reductions and auctions.  

The Southwest suburbs (Oswego, Plainfield and Yorkville) are so tremendously over-supplied with vacant lots (both attached and detached) that it could take 5 to 7 years to work through the inventory that is already in the ground (not counting the units that are in the entitlement process).  At the present time, there are 2,913 attached vacant lots/units and 7,103 detached vacant lots ready to build on in Oswego, Plainfield and Yorkville.  This totals over 10,000 vacant lots in these three municipalities!  Using 2006 permit figures, this equates to 3 1/2 years of supply, and we don't think we will see 2006 absorption levels anytime soon.

Other markets are also stressed with oversupply of existing lots including Elgin/Pingree Grove, Joliet and Woodstock.

It is going to take price reductions, product adjustments and time to work through this inventory.  The good news is that there are some submarkets that will improve much sooner than those listed above.  We will discuss those in our next blog.

Small Doses of Optimism

We have been reading and hearing about small doses of optimism in the Chicago housing market in the recent weeks. There is no better way to find out what is going on in the marketplace than talking directly to those on the front line, that is the sales agents at new home communities. I decided to spend a day wandering around Elgin, talking to whomever was willing to have a conversation. I found that there is generally a sense of optimism in the new home communities. Maybe the sales agents that I spoke with are searching for any small sign of hope, but maybe there really is some activity taking place.

One sales associates told me that they had 8 sales in March, a mix of townhomes and single family homes. She also indicated that she had appointments with 4 others during the next three days who were going to sign contracts. I asked her how this compared to last year and she said it was about the same but it "felt much better." Almost every person I talked to said that traffic and sales had picked up in the last 30 days. Is this increase in activity a result of lower interest rates or the first time buyer tax rebate or builder incentives or just seasonal activity? Each agent said it was a combination of everything. At the end of the day, does it really matter? What does matter is that there seems to be a little bit of thaw taking place in the housing market, at least in Elgin. Is this sustainable? Only time will tell, but what is apparent is that the mood of new home sales associates in Elgin is cautiously optimistic.